Classic Knitwear and Guardian: A Perfect Fit?

Amanda Jara, Caseem Desphy, Min Bae, Andy Pham & Yuansong Cao (Allen) Marketing Strategy 464

Tuesday, April 17th, 2018

Case Analysis #1: Classic Knitwear and Guardian: A Perfect Fit?

Problem Statement

Classic Knitwear, a publicly traded company headquartered in Miami, Florida, was established in 1995 as a manufacturer and distributor of unbranded casual knit apparel (t-shirts, sweatshirts, etc). The company operates in the $24.5 billion category of non-fashion knitwear. In 2006, the company decided to explore the introduction of a branded line of insect-repellent clothing. The goal was to improve gross margins over 20% from where they stood by then. The company has a lack of brand recognition among retail customers, which doesn’t allow their products to be differentiated.

In order to improve their margins, Classic is considering to partner via licensing agreements for clothing (launch of a line of insect repellent shirts). The Guardian is a manufacturer of insect repellents that offers odorless protection against mosquitoes, ticks, etc. This company is well-known by its target market of outdoor enthusiasts. Classic is considering whether to take advantage of the Guardian’s reputation to sell their clothing line under this successful brand. The partnership represents opportunities and risks for the company. The issue is that Classic doesn’t know whether to launch with Guardian or not. If they do so, the marketing investment will be reduced from $8 million to $3 million and their promotion would increase. Also, they would have to pay royalty to the Guardian, all advertising and promotional events for Classic has to be approved by the Guardian and Classic will depend on the Guardian to make all the decisions during the launch of their new clothing line. Therefore, Classic is debating whether to launch their line with the Guardian or not, if not look into a new option.

Alternative 1 - Do not launch with the Guardian

In this case, there are three decision options for Classic Knitwear. The first option is not to partner with the Guardian to launch the new insect repellents line, minimize the risk and keep doing what they were doing well to pursue production efficiencies. Based on the report, the company has a revenue of $550 million, which represents an average of 18% of gross margin in 2005. It mostly operates in the $24.5 billion category of non-fashion casual knitwear. As mentioned in the case, there is a 75% of revenue of about $413 million generated by wholesalers. For years, the company has been considered as the No.2 industrial leader in this sector with a 16.5% of market share.

If CEO Miller decides not to launch the new clothing line with Guardian, the company doesn’t need to take the risk of opening a new clothing line with unproven technology. Even though they have a low gross margin and a low brand recognition, not launching with the Guardian still might be a stable and safe play for Classic because it requires no additional marketing cost or efforts. In addition, only 50% of customers state that they would definitely buy an additional shirt for the following year. However, if the company keeps doing what they have been doing , no new decision or strategy, the company will still remain in the 18% to 20% gross margin with no brand recognition. Plus, since the growing national awareness of insect-borne illnesses, there is a huge risk that Classic’s competitors enter the market first and work with a company who has an excellent insect-repellent technology such as the Guardian.

Alternative 2 - Launch Classic Knitwear with the Guardian

The second option is to partner with the Guardian to launch the new insect repellent clothing. The only way Classic Knitwear would be able to grow their brand would be expanding their product line and implementing a marketing plan for the company. If CEO Miller decides to partner with Guardian and launch the new insect repellent clothing, Classic will be able to meet its goal of consistently increasing their gross margins to above 20% and gaining new brand awareness.

Guardian is well-known by its target market of outdoor enthusiasts. Classic will be able to take advantage of Guardian’s reputation and sell their clothing line under this successful brand. By doing so, Classic will have access to new distributors (i.e. L.L Bean) without much risk. This will allow Classic to have a competitive advantage over its competitors. The biggest opportunity for Classic is the expansion of a new clothing line. The partnership will allow Classic to be one of the first on the market to carry